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Tuesday, 15 October 2013

Analysts expect RBI to hike repo by 25 bps, cut MSF by 25 bps

With headline inflation inching up to 6.46 per cent and signs of stability in the currency market, analysts said RBI Governor Raghuram Rajan could hike repo rate by 0.25 per cent and cut the MSF rate by a similar margin in the October 30 monetary policy review.

"In his maiden policy review, Rajan stressed on inflation control as his priority. With inflation now out of RBI's comfort zone for four months in a row, we expect a 0.25 per cent repo rate hike," rating agency Crisil said in a note.

According to the research arm of the country's largest lender State Bank of IndiaBSE -2.09 %, with stability in the currency, Rajan is likely to lower the marginal standing facility (MSF) rate, at which the RBI lends to the banks, once the lenders exhaust their overnight repo borrowing limits.

"We expect repo hike of 0.25 per cent and MSF downward recalibration of 0.25 per cent," it said in a note.

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